REC LTD - Quantamental Equity Research Report

Quantamental Equity Research on REC LTD | Release: 04 Dec 2018 18:18:42 UTC+05:30 | Reporting Currency: INR | Trading Currency: INR | Exchange:NSE/BSE NSE CODE:PRAKASH and BSE CODE:506022
Last Close:  INR 105.65
Fair Value:  INR 122
Est. Price by Mar 19:  INR 120.55
Market Capitalization (INR Crs):  20865.01
Industry:  Iron & Steel/Interm.Products
Rating:  BUY
Upside:  15%
Company Profile
Rural Electrification Corporation Limited is engaged in other financial services and activities-other Credit granting. The Company provides finance to power sector. It finances and promotes rural electrification projects all over the country. It provides financial assistance to State Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural electrification projects as are sponsored by them.
Growth Per Share
Particulars 1-Year 3-Year 5-Year  
Revenue % -6% 35% 89%  
EBIT % -7% 7% 56%  
Earnings % -26% -12% 22%  
Book Value %  6% 43% 103%  
Stock Total Return %  -35% -22% 19%  
Share holding pattern
Particulars %age   
(A) Promoter & Promoter Group 57.99  
(B) FII/FPI 22.14  
(C) DII/Insurance Companies 9.22  
(D) Public holding < 2 lakhs of cap. 6.36  
(E) Others 4.29  
Grand Total 100.00  
Fundamentals (Historical and Estimated)
Particulars Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18  Mar-19 E   Mar-20 E   Mar-21 E   Mar-22 E   Mar-23 E   
Price 129 123 110 108 119 164 84 197 128 121 128 137 148 159  
Return on Equity 18% 20% 19% 22% 23% 21% 20% 19% 13% 12% 12% 12% 12% 12%  
Price to Earning  12.7 9.5 7.7 5.6 5.0 6.1 2.9 6.2 5.5 5.0 5.0 5.0 5.0 5.0  
EVTI 12.0 11.0 10.6 9.5 8.7 8.9 7.7 8.6 9.9 9.7 9.6 9.6 9.5 9.5  
EVTIFM 12.7 9.5 7.7 5.6 5.0 6.1 2.9 6.2 5.5 5.0 5.0 5.0 5.0 5.0  
Price to Book Value 2.3 1.9 1.5 1.2 1.1 1.3 0.6 1.2 0.7 0.6 0.6 0.6 0.6 0.6  
Debt to Equity  5.0 5.5 6.2 6.2 6.1 6.1 5.9 5.0 5.6 5.2 4.9 4.6 4.4 4.2  
Dividend Yield 3% 3% 3% 4% 4% 3% 10% 5% 7% 7% 7% 7% 7% 7%  
Cash Flow to Firm -13% -8% -10% -5% -1% -4% 3% 11% -4% 9% 8% 8% 7% 6%  
Detailed Estimates
Title Mar-18 Mar-19 E Mar-20 E Mar-21 E Mar-22 E Mar-23 E  
Sales     22,423.95     22,869.25     23,495.73     24,316.41     25,349.00     26,616.45  
EBITDA     20,687.22     21,047.24     21,623.81     22,379.11     23,329.43     24,495.90  
EBIT     20,681.61     21,041.52     21,618.22     22,373.65     23,324.10     24,490.69  
PBT       6,852.09       7,212.00       7,681.97       8,214.47       8,818.20       9,503.72  
NPAT       4,647.00       4,760.64       5,070.87       5,422.37       5,820.89       6,273.41  
Price to Earning               5.46              5.00              5.00              5.00              5.00              5.00  
Price to Book Value              0.71              0.62              0.61              0.60              0.59              0.59  
Debt to Equity               5.60              5.20              4.87              4.60              4.39              4.23  
Return on Equity              0.13              0.12              0.12              0.12              0.12              0.12  
Enterprise Value to Total Income (EVTI)              9.87              9.68              9.62              9.58              9.54              9.51  
Enterprise Value to Total Income to Firm Margin(EVTIFM)            15.82            15.97            15.88            15.80            15.73            15.69  
Price or Est. Share Prices          128.48          120.55          128.45          137.40          147.50          159.00  
DISCOUNTED CASH FLOW
Title Mar-19 E Mar-20 E Mar-21 E Mar-22 E Mar-23 E  
PBT       7,212.00       7,681.97       8,214.47       8,818.20       9,503.72  
Interest     13,829.52     13,936.25     14,159.18     14,505.89     14,986.97  
Depreciation              5.72              5.59              5.46              5.33              5.21  
Cash Flow Before Tax     21,047.24     21,623.81     22,379.11     23,329.43     24,495.90  
Tax Rate            33.99            33.99            33.99            33.99            33.99  
Cash Flow After Tax     13,893.29     14,273.88     14,772.45     15,399.76     16,169.74  
Terminal Cash Flow                                                                                      -    2,64,875.04  
Total Cash Flow     13,893.29     14,273.88     14,772.45     15,399.76  2,81,044.78  
Present Value of Cash Flow  2,48,567.84  
Debt  2,24,478.82  
Value of Equity     24,089.02  
Fair Value Per Share          122.00  
Equity          20,865
Debt       1,98,792
Beta Take from Reuters 2.5
Risk Free Rate Prevailing Yield in India 8%
Market Risk Premium Assuming 8.82% premium for Equity Investments 9%
Interest Paid          13,830
Tax Benefit            4,451
Interest Net of Tax            9,379
Debt       1,98,792
Cost of Debt 5%
Cost of Equity 30%
Debt Weight 91%
Equity Weight 9%
WACC 7%
Cash Flow of Mar-23 E     16,169.74
Growth 0.5%
Present Value of Terminal Cashflow  2,64,875.04
Peer Comparision
# Name CMP Rs. Mar Cap Rs.Cr.  B.V. Rs. Annualized ROE % ROCE % Latest EVTI Latest EVTIFM CMP / BV P/E Debt / Eq Div Yld % Growth Rate R % SGR % Ann Total Income PQEIOI QoQ Sales % Qtr Sales Var % QoQ Profits % Qtr Profit Var % Graham's Number Rs.
   1  Power Fin.Corpn.             97.15          25,648          144.97            17.02            10.04              8.51            12.98              0.67              4.87              5.76              8.03            11.04          164.53          29,651            65.64                 19              6.30              8.16             -1.32            10.54
   2  REC Ltd           105.65          20,865          179.71            21.06              9.51              8.52            14.32              0.59              4.33              5.60              8.66            12.87          854.95          25,276            57.99                 23              1.89              1.99            75.94            36.50
   3  Tour. Fin. Corp.           126.35            1,020            86.09            12.51            11.61              9.27            13.85              1.47            14.51              2.09              1.58              9.83         -487.53               206              8.87                 66           -11.11             -1.12           -22.68             -7.93
   4  Guj. State Fin.               1.56                 14         -253.96              6.33                  -              23.16              3.55                  -                    -               -0.30                  -                6.33           -12.34                 24            83.95                  -0         -171.43         -115.54             -5.35             -7.65
   5  IFCI             13.70            2,324            34.08           -32.14              0.95              5.53           -55.70              0.40                  -                3.99                  -             -32.14           -56.38            2,693            56.42                  -6           -12.62           -28.75           -39.86         -223.00
   6                                                                  -                    -                    -                    -                    -                    -                    -                    -                    -                    -                    -                    -                    -                    -                    -                    -                    -                    -                    -                    -                    -  

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